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BP Red Tape Has Gulf Businesses Facing Disaster

The reefs that David Walter makes for anglers to drop into the Gulf of Mexico are fake, but his frustration as he tries to win compensation from BP for lost income is real.

Stan Honda | AFP | Getty Images

State regulators stopped issuing permits for the reefs on May 4 because of the oil spill, effectively killing off $350,000 in Walter's expected business. It sent him into a labyrinth of archived invoices and documents lost by BP. Finally, an offer came: $5,000.

"I said that's not fair because if you say that, then I have to go out of business and I lose everything," said Walter, whose company is based in Alabama.

Fishermen, property owners and businesspeople who have filed damage claims with BP are angrily complaining of delays, excessive paperwork and skimpy payments that have put them on the verge of going under as the financial and environmental toll of the seven-week-old disaster grows.

Out in the Gulf, meanwhile, the oil company on Wednesday captured more of the crude that's been gushing from the bottom of the seasince April and began bringing in more heavy equipment to handle it.

The containment effort played out as BP stock continued to plunge amid fears that the company might be forced to suspend dividends and find itself overwhelmed by the cleanup costs, penalties, damage claims and lawsuits generated by the biggest oil spill in U.S. history.

In a federal filing Thursday, the company said the cost of its response to the oil spill has grown to $1.43 billion.

BP tried to reassure investors before the London Stock Exchange opened Thursday, saying it was in a strong financial position and it saw no reason to justify the U.S. sell-off, and many analysts agree that the company can withstand the crisis.

BP's U.S.-traded shares jumped Thursday, but the stock has dropped precipitously over the last two months.

Shrimpers, oystermen, seafood businesses, out-of-work drilling crews and the tourism industry all are lining up to get paid back the billions of dollars washed away by the slick, and tempers have flared as locals direct outrage at BP over what they see as a tangle of red tape.

"Every day we call the adjuster eight or 10 times. There's no answer, no answering machine," said Regina Shipp, who has filed $33,000 in claims for lost business at her restaurant in Alabama. "If BP doesn't pay us within two months, we'll be out of business. We've got two kids."

BP spokesman Mark Proegler disputed any notion that the claims process is slow or that the company is dragging its feet.

Proegler said BP has cut the time to process claims and issue a check from 45 days to as little as 48 hours, if the necessary documentation has been supplied. BP officials acknowledged that while no claims have been denied, thousands and thousands had not been paid by late last week because the company required more documentation.

At the bottom of the sea, the containment cap on the ruptured well is capturing 630,000 gallons a day and pumping it to a ship at the surface, and the amount could nearly double by next week to roughly 1.17 million gallons, said Coast Guard Adm. Thad Allen, who is overseeing the crisis for the government.

A second vessel expected to arrive within days should greatly boost capacity. BP also plans to bring in a tanker from the North Sea to help transport oil and an incinerator to burn off some of the crude.

The government has estimated 600,000 to 1.2 million gallons are leaking per day, but a scientist on a task force studying the flow said the actual rate may be between 798,000 gallons and 1.8 million. A task force member said an estimate come Thursday or Friday.

Crews Labor in 110-Degree Heat

Crews working at the site toiled under oppressive conditions as the heat index soared to 110 degrees and toxic vapors emanated from the depths. Fireboats were on hand to pour water on the surface to ease the fumes.

Allen also confronted BP over the complaints about the claims process, warning the company in a letter: "We need complete, ongoing transparency into BP's claims process including detailed information on how claims are being evaluated, how payment amounts are being calculated and how quickly claims are being processed."

Workers are seen clearing the beach of the oil residue that has washed up on Pensacola Beach from the Deepwater Horizon oil spill in the Gulf of Mexico on June 7, 2010 in Pensacola, Florida. Early reports indicate that BP's latest plan to stem the flow of oil from the site of the Deepwater Horizon incident may be having some success.
Getty Images
Workers are seen clearing the beach of the oil residue that has washed up on Pensacola Beach from the Deepwater Horizon oil spill in the Gulf of Mexico on June 7, 2010 in Pensacola, Florida. Early reports indicate that BP's latest plan to stem the flow of oil from the site of the Deepwater Horizon incident may be having some success.

The admiral this week created a team including officials from the Federal Emergency Management Agency to help with the damage claims. It will send workers into Gulf communities to provide information about the process. He also planned to discuss the complaints with BP officials Wednesday.

Under federal law, BP is required to pay for a range of losses, including property damage and lost earnings. Residents and businesses can call a telephone line to report losses, file a claim online and seek help at one of 25 claims offices around the Gulf. Deckhands and other fishermen generally need to show a photo ID and documentation such as a pay stub showing how much money they typically earn.

To jump-start the process, BP was initially offering an immediate $2,500 to deckhands and $5,000 to fishing boat owners. Workers can receive additional compensation once their paperwork and larger claims are approved. BP said it has paid 18,000 claims so far and has hired 600 adjusters and operators to handle the cases.

The oil giant said it expects to spend $84 million through June alone to compensate people for lost wages and profits. That number will grow as new claims are received. When it is all over, BP could be looking at total liabilities in the billions, perhaps tens of billions, according to analysts.

BP stock dropped $5.45, or 16 percent, Wednesday—easily its worst day since the April 20 rig explosion that set off the spill and killed 11 workers. In the seven weeks since then, the company has lost half its market value.

The latest slide came after Interior Secretary Ken Salazar promised a Senate energy panel to ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of the Obama administration's six-month moratorium on deep-water drilling. In an interview Thursday on ABC's "Good Morning America," Louisiana Sen. Mary Landrieu reiterated her call to end the moratorium, saying it will cause economic hardship in the region.

"Every one of these 33 deep-water wells employs, directly, hundreds of people and indirectly thousands," she said.

Not everyone had complaints about the claims process. Bart Harrison of Clay, Ala., filed his first claim on Wednesday morning for lost rental income on his coastal property and expected to have a check for $1,010 within a few hours. The only documentation required was tax returns and rental histories for his units, which were both easy to provide.

"The guy I talked to was knowledgeable and respectful," Harrison said. "It seemed like he really wanted to write a check and please me since it was my first time in."

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